Fraud Week 2014: What You Might Have Missed

AUTHOR’S POST

Mandy Moody, CFE
ACFE Media Manager

The ACFE would like to say “thank you” to all International Fraud Awareness Week Official Supporters, supporting media, bloggers, tweeters and posters for the amazing participation in Fraud Week last week. We would also like to thank our Featured Supporters this year: Orange, CRI Group, BNP Paribas and Wynyard Group. The success of Fraud Week could not have happened without all of these dedicated people working together around the globe to spread the message that fraud will not be tolerated.

Even with the many articles and resources shared, you may not have seen all that was done to highlight fraud detection and prevention. Here are some Fraud Week highlights you may have missed:

• Video: 5 Steps to Reduce Small Business Fraud
• Article: An Anti-Fraud Checklist for Fraud Awareness Week 
• Article: Banking and Social Media Tips to Protect Yourself
• Slideshow: How to Set Up a Whistleblower Hotline
• Article: Internal Cash Controls to Combat Evolving Fraud
• Infographic: The Cost of Complacency
• Photos: The Anti-Fraud Olympics in Dubai

Remember, fraud awareness doesn't begin and end with Fraud Week. It is a year-round effort being supported by fraud examiners all over the world. Thank you all again, and we look forward to next year’s event!

Need Access to Historical Banking Information? Better read the fine print...

SPECIAL TO THE WEB

Stephen Pedneault, CFE, CPA, CFF

In the past 10 years, technology has ushered in tremendous changes to the banking industry. Paper bank statements that travel via snail mail are the exception to the rule — given online access and "going green" — and the return of your canceled checks is archaic.

Many merchants and vendors scan or convert written paper checks into electronic transactions to complete their deposits, and banks have enabled deposit by digital image so you can use your smartphone to transmit pictures of checks. Paper is old news — replaced by electronic access to digitally stored information.

Financial institutions might be saving money and becoming more efficient, but be prepared — if you now need a bank’s paper records for a case you could receive them: 1) quickly with a smile, 2) after a long wait with a large fee or 3) never.

NEED FOR RECORDS

Many account holders find reviewing their bank accounts and transactions online sufficient. Their access to many online activities and balances are closer to real time. Stop payments, transfers, vendor payments and other transactions already happen in real time.

Most financial institutions maintain online access for statements and activity for up to one year. Customers no longer have to print statements and only review canceled check images when particular transactions are in question.

This strategy saves considerable space in filing cabinets and attics. But sometimes we need bank records for these reasons:

• The IRS requires taxpayers to maintain supporting records for their returns for a minimum of three years for most items. Some records carry a longer requirement, and in other cases we must archive those records permanently.
• A business’ ability to support the amounts reported on filed tax returns. This requires past bank records, including deposit details and check images.
• Notice of a federal or state tax agency's audit. This might come two to three years after the filing of tax returns. Online access to the supporting bank statements, deposit details and canceled checks might no longer exist, and the period available online might be limited to the most recent year's information. The account holder must now turn to the financial institution to produce records to satisfy the auditor.
• Divorce or any litigation matter. The disputing party must provide the opposing party with financial details, including bank statements, credit card statements and other account details through the litigation discovery process. The period requiring record documentation could go back many years, and banks typically only retain records for seven years (as little as two years for certain items).
• Any fiduciary matter, i.e., situations in which someone was entrusted with the custody and care of funds for someone else. The fiduciary would be required to produce records to substantiate the maintenance and use of the funds, and bank statements, deposit details and canceled check images must support any accounting the fiduciary provides. 

EMBEZZLEMENT LEADS TO BANKING FRUSTRATION

A recent case illustrates a worst-case scenario involving a request for bank information. A small, 30-unit condominium association maintained two bank accounts at a local branch of a financial institution. The association's board of directors — comprised of unit owners — maintained a contractual relationship with a property manager to oversee the association, including the accounting books and records, bank accounts and unit owner information. The property manager, who possessed proper licensing and insurance, provided services for two years.

The property manager usually attended the regular board of directors’ meeting over the course of two years. However, she surprised everyone when she abruptly resigned and told board members that she’d embezzled all of the association's funds. She said she’d retained an attorney, and that the board should contact counsel to start the process of finding a new property manager. Obviously, the board was shell-shocked. It wasn’t prepared to deal with the theft, and it couldn’t operate the association with no funds.

The attorney representing the former property manager assured the board’s counsel his client, as required by state law, would turn over all her records to the association. Unfortunately, after weeks of delay, when the former property manager’s attorney finally turned over the records, the storage boxes didn’t include even the minimal level of records, such as complete monthly bank statements, deposit details and supporting paid invoices.

With the bank account numbers and limited information in hand, the board president — who was a signatory on both bank accounts — visited the local branch of the association’s bank to request replacement bank statements for both bank accounts.

Read the rest of the article on Fraud-Magazine.com.